An audit of land records commissioned by the Seattle City Council and leaked to local activists found that many mortgages held within the city are void, meaning that foreclosures based on them are illegal and unenforceable.

The revelation makes the King County recording offices where the documents are held “a massive crime scene,” writes David Dayen at The Intercept.

The audit was conducted by McDonnell Property Analytics, a forensic analyst firm specializing in mortgage documents. The findings could cast doubt on mortgage agreements nationwide.

Dayen continues:

The problems stem from the Mortgage Electronic Registration Systems (MERS), an entity banks created so they could transfer mortgages privately, saving them billions of dollars in transfer fees to public recording offices. In Washington state, MERS’ practices were found illegal by the State Supreme Court in 2012. But MERS continued those practices with only cosmetic changes, the audit found. …

Christopher King, a Seattle-area real estate professional who makes short films about the foreclosure crisis at MortgageMovies.net, confronted the City Council at its Monday night meeting. King has been among several Seattle-area activists demanding that council members pay attention to fraud in the public records, even inviting them to public seminars on the issue. …

In every one of the 195 mortgage assignments reviewed by McDonnell Property Analytics, MERS attempted to transfer legal interests in the mortgage, which the Washington Supreme Court says it does not hold, to another entity.

By pretending to transfer interests that MERS does not own, the assignments are fraudulent under Washington law, the audit concludes. And all subsequent filings, and subsequent foreclosures, depending upon that invalidated assignment, are similarly void. The audit cites state law that makes filing false or forged documents to public offices a felony, with penalties of up to $5,000 and five years in prison. …

The audit’s recommendations include enforcing the felony laws, enacting mortgage fraud statutes with higher monetary penalties for filing false mortgage documents, and requiring all transfers of mortgage notes to be recorded. It even suggested trying to suspend MERS’ license to operate in Washington.

“The city is not being proactive in the face of ongoing lawlessness,” Christopher King wrote on his website when he announced the release of the audit.

Dayen quoted Marie McDonnell, an author of the audit, as writing: “Both legislative and prosecutorial action is necessary to protect the public. … The flooding of void title documents into public land recording offices throughout Washington must be stopped, as swiftly and surely as the public works department would stop the flow of waste water from a broken artery that threatened the public’s health and safety.”